Tesla earns record $2.3bn quarterly net profit

Sales between October and December jumped 65% yearly to more than $17.7bn

Tesla, which delivered record 940,000 vehicles last year, aims to rapidly increase its production and grab a huge market share in 2022. AP

Tesla, the world's most valuable automaker, reported its largest quarterly net profit between October and December.

The company crossed the $2 billion mark in net profit for the first time despite a global semiconductor shortage and supply chain disruptions that have affected the motor industry worldwide.

The electric vehicle maker’s fourth-quarter net profit rose about 760 per cent year on year to more than $2.3bn, almost $700 million more than the income earned in the same period in 2020.

This is the 10th straight profitable quarter and the third consecutive three-month period with more than $1bn profit for the world’s biggest EV maker.

Revenue during the quarter jumped 65 per cent to more than $17.7bn, exceeding analysts’ expectations of $16.5bn.

This was the fifth time in a row the company reported $10bn or more in sales. It was nearly 29 per cent more on a quarterly basis.

“2021 was a breakthrough year for Tesla,” the company said. It said there should no longer be doubt about the “viability and profitability” of EVs.

“With our deliveries up 87 per cent in 2021, we achieved the highest quarterly operating margin … demonstrating that EVs can be more profitable than combustion engine vehicles,” it said.

The Nasdaq-listed company's stock price rose more than 2 per cent to $937.4 a share on Wednesday, giving the company a market capitalisation of $941.1bn.

Tesla joined the $1 trillion market cap club in October as the company’s stock surged to a record high of more than $1,000 a share nearly 11 years after the company went public.

The company said its cash and cash equivalents “increased sequentially by $1.5bn to $17.6bn” at the end of the last quarter.

It was driven mainly by free cash flow of $2.8bn, partially offset by net debt and finance lease repayments of $1.5bn.

The company’s total debt excluding vehicle and energy product financing dropped to $1.4bn at the end of last year.

Tesla, which delivered a record 940,000 vehicles last year, aims to rapidly increase its production and grab a huge market share in 2022.

The company said competitiveness in the EV market will be determined by the ability to add capacity across the supply chain and ramp production.

“We aim to increase our production as quickly as we can, not only through ramping production at new factories in Austin and Berlin, but also by maximising output from our established factories in Fremont and Shanghai,” Tesla said.

The company increased its capital expenditure in the fourth quarter by about 57 per cent yearly to $1.8bn, while its quarter-end cash and cash equivalents decreased 9 per cent on an annual basis to $17.6bn in the three-month period.

Tesla delivered a record 308,600 vehicles in the fourth quarter of last year, about 27.8 per cent, or 67,300 vehicles, more than the cars sold in the third quarter of last year.

In the fourth quarter, it sold 296,850 units of Model 3s and Model Ys, although it delivered only 11,750 units of its more expensive Model S saloons and Model X SUVs, which are priced from $75,000.

The company said it experienced Covid-induced challenges related to supply chain, transport, labour and other manufacturing hurdles in the previous quarter that limited its “ability to run factories at full capacity”.

“Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022,” Tesla said.

Tesla said the company has sufficient liquidity to fund its future product road map, long-term capacity expansion plans and other expenses.

The company plans to grow its manufacturing capacity, over a multiyear horizon, and it intends to achieve 50 per cent average annual growth in vehicle deliveries.

The company’s rate of growth will depend on its equipment capacity, operational efficiency and the capacity and stability of the supply chain, industry analysts said.

Tesla produces its vehicles in Fremont, California; Austin, Texas; and Shanghai, China.

“After [the] final certification of Austin-made Model Y, we plan to start deliveries to customers,” the company said.

“Fremont factory achieved record production in 2021. We believe there is potential to extend overall capacity [from the US factories] beyond 600,000 per year.”

The company is still in the process of finalising the manufacturing permit from local authorities in Berlin, Germany.